Electricity heating: Only for the affluent?

Flash sales are up at electronic stores across the country. Instant electric devices for heating and cooking are in high demand, as domestic consumers gasp for gas. There is a concessional package for incremental consumption during winters, offering electricity at 50 percent for year-on-year incremental electricity consumption. There is early evidence that some may have converted to electricity usage for heating purposes – but it is early days to gauge how successful the strategy would be.

Regardless, not everyone will find it affordable to switch from piped gas to electricity, once the inevitable happens. The delta between natural gas and electricity heating costs is simply too large to ignore.

Even if the government were to abolish the cross-subsidy mechanism that has for decades kept domestic gas tariffs substantially lower – it will be more than six times cheaper than electricity at prevailing tariffs (considering 85% efficiency for gas-based heating versus 100% for electricity). This too is on the conservative side, as it only accounts for the base tariff and not the monthly adjustments, which have of late been a big part of the final consumer tariff.

The proponents would argue that the power fuel generation mix is destined to improve further over the next ten years, by the time Pakistan would run out of natural gas reserves, save a miracle discovery. There is no denying that the indicative capacity expansion puts greater emphasis on indigenous fuel sources, but one has to bear in mind that it will take much longer for that to translate into lower tariffs.

The capacity component of the tariff will continue to stay on the higher side, as more hydel, nuclear, and renewable fuel become part of the mix. Burning the fuel directly for heating will always be more efficient than using electricity generated as a process of heating a combination of all fuels. Heating water via electric equipment, on an average takes four times more time than gas, even if that gets sorted out down the line.

At current spot rates, the argument definitely goes against RLNG, but there is little doubt that LNG prices would revert to mean, sooner or later. It may be unpopular, but one can’t help wondering if expanding the gas pipeline network further is the way to go. Imported RLNG will continue to be two to three times cheaper than electricity in the foreseeable future. Yes, there will be a strain on the import bill, but some of it will come as a substitute to LPG, which is a far more expensive heating fuel, and used largely by the lowest income segments of the country, further aggravating the disparity.

A more sophisticated study needs to be carried out to weigh the options and iron out the economic and social disparities when it comes to heating requirements. As things stand, switching to electricity is only for the affluent, even with the concessional winter package for incremental consumption. Mind you, it is not a lost cause yet, as Pakistan’s entire exploration activity has focused around two basins, with a very high success rate. However difficult it may be for Middle Indus Basin, Sulieman, and Kirthar Fldbelts – no stone must be left unturned to make arrangements overcoming technical constraints. Pakistan could do with another Sui or two. It is worth a try.

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